Before you buy a new 50-year gilt, think about the 1932 war loan...

Labour is set to offer longer-term bonds,but history suggests you could get your fingers burnt, warns Matthew Wall

THE government said last week that it would start issuing 50-year gilts from May, but investors have been urged to take care: thousands of savers have had their fingers burnt by long-term bonds in the past.

More than £1.9 billion is still invested in the 1932 war loan, issued by the government as a top-up to previous issues used to finance the first world war.

The gilt had no fixed redemption date and the value of the bond is now 25% below its original price.

Gilts are traditionally favoured by cautious investors who are looking to boost income at minimal risk to their capital.

Essentially, gilts are loans to the British government. They pay a fixed rate of interest, called the coupon, and investors should get back their capital at the end of the term — unless the government goes bust.